Coal block cancellation letters yet to be issued

Three companies have challenged the cancellation of their blocks in the Delhi high court. Photo: Ghetty Images

Updated: Sat, Sep 29 2012. 01 22 AM IST

New Delhi: India’s coal ministry will get the law ministry to vet the drafts of the letters cancelling blocks and seeking the encashment of bank guarantees, but three companies have already filed petitions in the court, two senior officials said on Friday.

“It will take two-three days before the letters can be sent,” said one of the officials on condition of anonymity. “We are having the framework of the letter vetted by the law ministry.”

The second official said JSW Steel Ltd, Bhushan Steel Ltd and SKS Ispat Ltd have filed petitions in the Delhi high court and many companies are representing their cases in the ministry.

“We filed the petition last Monday,” said Nitin Johari, chief financial officer at Bhushan Steel. “We have invested in the end use. We have invested Rs.21,000 crore between 2005 and 2011 in our power plant and sponge iron plant in Orissa.”

Bhushan Steel’s block New Patrapara in Orissa was cancelled earlier this month by coal minister Sriprakash Jaiswal after a recommendation by the inter-ministerial group (IMG). This block is jointly held by Orissa Sponge Iron Ltd, Visa Steel Ltd and five other companies.

A spokesman from JSW Steel said, “It is premature to comment when no communication is received by the company from relevant authorities.” JSW’s Gourangdih ABC block in West Bengal, jointly held by Himachal EMTA Power Ltd, has been cancelled.

An analyst said he expected more companies to file petitions and the first case would set a precedent.

“Many of them could go to court and the first judgement could be crucial and its relevance could be wider,” said Girish Shirodkar, a partner and managing director of management consultant Strategic Decisions Group AsiaPac. Shirodkar said the courts could expedite cases such as the 2G spectrum case owing to its significance, but the coal block cases would be more individual in nature.

The IMG is expected to resume its meetings in the second week of October and examine government coal block holders. This covers about 29 coal blocks from a list of 58 served show-cause notices by the coal ministry.

The government allocated 195 coal blocks from 1993 to 2011 to 289 companies, but only 30 of those started production. Most of them were stuck owing to lack of clearances or funding or interest, coal ministry officials have said.

The controversy over allocations was sparked by a Comptroller and Auditor General of India (CAG) report in August alleging a notional loss of Rs.1.86 trillion owing to irregularities in the process. The CAG also said the allocations were made in an non-transparent manner.

The Central Bureau of Investigation has booked cases against companies that were allotted seven coal blocks and is expected to investigate more.